Tax & IR35 News

HMRC Getting Better?

HMRC claims it is on target to meet its objectives to provide a better service and has made a Joint Understanding Agents Project statement outlining its progress in this area.

Jack of All Trades

A recent First Tier Tax Tribunal case involved one of those rare occurrences of HMRC arguing strongly that a taxpayer should be treated as self-employed and not employed as the individual had claimed.

IR35 and the Civil Service – Again!

Apparently Danny Alexander, Chief Secretary to the Treasury, has written to the Chancellor to inform him that there are more than 2,000 senior civil servants using personal service companies rather than being employees.

More IR35 Delays

Contractor Weekly understands that the much anticipated 'business entity' test, together with other initiatives to improve the administration of IR35 will not be officially disclosed until either Bank Holiday Monday or that same week.

The 'business entity' test, along with the six IR35 scenarios plus guidance is expected to appear on HMRC's website on 7th May, having originally been planned for April.

Erroneous Penalty Notices

HMRC found itself having to apologise for issuing 12,000 penalty notices to those people who have been removed from the self assessment process.

IR35 Alchemy

Twelve years ago IR35 was born to counter the perceived abuse of individuals collecting their P45s on the Friday yet turning up for work the following Monday and carrying on as nothing had changed, except for the fact that they were now operating through their own personal service company. As part of any IR35 review therefore HMRC will scrutinise the period leading up to the date a worker is taken on where the contractor:

• replaced another worker who was an employee; or
• was previously an employee of the business and became self-employed without any change in the terms and conditions of the engagement.

CBI Defends Big Business

The Confederation of British Industry (CBI) recently launched a major new report titled, 'Tax and British business: Making the case' in which it declares it a myth that large corporations are not paying their fair share of tax and are contributing next to nothing to government coffers. 

5 Tips to Improve Your IR35 Position

We know that IR35 is going to be with us for the foreseeable future. We also know that there will be a significant increase in the number of enquiries, so there is no better time than the present to ensure you are well protected.

You often can’t help the contract you are given, or the attitude of the client you are working for. But there are certain steps you can take to significantly improve your prospects of success should HMRC come knocking.

Media Blasted by Institute President

Anthony Thomas, the president of the Chartered Institute of Taxation, has launched a scathing attack on the media's reporting of taxation, describing it as derogatory and deceiving. Politicians were not spared criticism either for the part they play in creating misunderstanding of tax issues.

IR35 Business Tests Proving Testing

Just when you thought significant progress had finally been made over improvements to IR35 administration and were eagerly anticipating the publication of the business entity tests, the PCG and other IR35 Forum members are at loggerheads with HMRC over the scoring system.

The business tests are designed to enable a freelancer to assess their exposure to IR35 enquiry, i.e. high, medium or low and will consist of a number of weighted questions. A positive or negative score will be attributed depending on the answer to a question but it is the scoring system itself that is causing disquiet.  

Electronic VAT Returns Compulsory

From 1st April 2012, virtually all businesses must now file their VAT returns online and pay their VAT electronically. The compulsory switch is for all accounting periods starting on or after 1st April 2012.

Are You a Service Company?

Only a few days remain before another tax year elapses and heralds in the filing of the Employer Annual Return, form P35, which must reach HMRC by no later than 19th May.

Each year part 3, question 6 - 'Are you a Service Company?' of the P35 causes some debate, i.e., to tick or not to tick the 'yes' box.

Limitation of Tax Reliefs

Budget 2012 announced that as from 6th April 2013 there will be limits to the amount of income tax relief individuals can claim with the aim to prevent individuals offsetting their entire income against income tax reliefs.

IR35 Business Test Imminent

The IR35 Forum finally released the minutes of its last two meetings of 21st February and 8th March and we now know that a business entity test will be published, on a trial basis, on HMRC's website in April.

During previous meetings of the IR35 Forum it had been agreed that two specific aspects would be developed to support the improvements necessary to administer IR35, namely:

1. Rather than HMRC carrying out an IR35 risk assessment on an individual contract basis, the business entity would be examined to determine whether HMRC considered a business to be high, medium or low risk in terms of selecting it for enquiry.
2. A set of scenarios would be developed and discussed by the Forum to establish common ground and differences between HMRC and industry representatives.
   
   Read more... Comments (3)

Millions More 40% Taxpayers by 2014

The Institute of Fiscal Studies (IFS) estimates that five million workers earning 'relatively modest salaries' could become higher rate taxpayers from 6th April 2013 as a result of the Budget announcement to lower the threshold at which individuals start to pay 40% on their income. From 6th April 2013 taxable income over £32,245 attracts tax at 40%, representing a £2,125 lowering of the threshold from 2012/13.